Cabinet approves Merger of Public Sector Bank through Alternative Mechanism

The Union Cabinet chaired byt he Prime Minister Shri Narendra Modi has given in-principle approval for Public Sector Banks to amalgamate through an Alternative Mechanism (AM). The decision would facilitate consolidation among the Nationalised Banks to create strong and competitive banks.

Salient features:

The salient features of the approval Framework for Consolidation of Public Sector Banks are as follows:

The decision regarding creating strong and competitive banks would be Solely based on commercial considerations.

The proposal must start from the Boards of Banks.

The proposals received from Banks for in-principl eapproval to formulate

Schemes of amalgamation shall be placed before the Alternative Mechanism (AM).

After in-principle approval, the Banks will take steps in accordance with law and SEBI’s requirements.

The final scheme will be notified by Central Government in consultation with The Reserve Bank of India.

“The alternative mechanism will give in-principle approvals to proposals of banks for their amalgamation,” said Finance Minister Arun Jaitley after the meeting.

The members of the mechanism will be decided by the Prime Minister, but are expected to include Jaitley and Minister of Road Transport and Highways Nitin Gadkari.

At present, there are 20 public sector banks, apart from State Bank of India.

While Jaitley said that the government is not targeting any fixed number of consolidations, he said that the exercise will help create strong and competitive banks.

The decision will be based on commercial consideration of the board of the banks involved.

“After getting in-principle approval, the banks will take steps in accordance with law and SEBI requirements. The final scheme will be notified by Central government in consultation with the Reserve Bank of India,” said an official statement.